Notice of Appearance: Joshua Sussberg, Partner at Kirkland & Ellis LLP

This week PETITION welcomes a notice of appearance by Joshua Sussberg, Partner in the New York office of Kirkland & Ellis LLP.

PETITION: What is the best piece of advice that you’ve been given in your career?

“Always be the most prepared. Period. Whether it is a call, meeting or court appearance, be the most prepared person there. This piece of advice is something I do not forget and pass on.”

PETITION: What is the best book you’ve read that’s helped guide you in your career?

A Civil Action. It was a requirement to read heading into law school and I went back and read it again years later. It teaches that one lawyer can ultimately make a difference. It also speaks to, and without question demonstrates, the high stakes and personal commitment the profession requires and demands. A must read.”

PETITION: What is the one product that helps make you a more efficient or relaxed pro?

“Wireless headphones. Airpods. But it really can be any wireless headphones at all.…”

PETITION: Cool. Anything interesting you’re listening to at the moment?

"Top hits on Spotify!”

PETITION Note: You’re one in (70) million, Josh!

PETITION: What is one notable trend you expect to see in ’18 that not enough people are talking about?

“Restructuring professionals spend lots of time these days talking about the retail, oil & gas and the healthcare sectors, with much less attention being paid to real estate (both commercial and multi family). While there is still a lot of capital in the market place, rising rates and lower rents may pressure this and cause dislocation later in the year.”

PETITION Note: We agree, Josh. We’ve been writing since our inception that the cavalier attitude that many players in the space have taken vis-a-vis the real estate sector is mistaken. If anything, the recent low price offered by Brookfield Capital Partners for General Growth Properties may be the canary in the coal mine for commercial real estate. Note also, this, relating to the liquidation of The Bon-Ton Stores:

Professional Fees (Long Cannibalization)

$1725/hour = CHA CHING!

What a month ya'll. We can't remember the last time that restructuring fees have gotten so much public and mainstream scrutiny. Last week we noted how The New Yorker took shots at restructuring professional fees in Puerto Rico. This week, Dow Jones Newswires took a look at Seadrill Ltd. and noted that Kirkland & Ellis LLP collected over $47mm in the 12 months prior to the case filing. Shareholders denied an equity committee must love that. Elsewhere, The New York Times gets into the game and asks in a MUST READ "Why Companies Like Toys 'R' Us Love to Go Bust in Richmond, Va." Which, of course, was interesting because they basically took the foundations of our piece here and raised by going "all in," alleging that Virginia is now a favorable venue because of blah ("rocket docket"), blah (debtor-favorable precedent) and BOOM (homies are getting P.A.I.D.). Here's the NYT dropping the bomb: "But perhaps one of the biggest draws, according to bankruptcy lawyers and academics, is the hefty rates lawyers are able to charge there. The New York law firm representing Toys “R” Us, Kirkland & Ellis, told the judge that its lawyers were charging as much as $1,745 an hour. That is 25 percent more than the average highest rate in 10 of the largest bankruptcies this year, according [to] an analysis by The New York Times." Points for creativity: jurisdictional arbitrage is our new favorite form of professional revenue generation. Of course, "the huge fees can eat into the money that is left over for small creditors - typically vendors, suppliers and pensioners." Did someone say "pensioners"? Happy holidays.
 

Private Equity Recruiting is Bananas

M*therf*ckers Have Lost Their G*d-damned Minds

There is so much to unpack in this stupid piece about the annual private equity recruiting frenzy. First, let's stop calling kids who are weeks out of college "talent" merely because they got a job in an investment bank trainee program. They haven't proven that they're talented at anything just yet. Going to an ivy league school, having a trust fund and being a douche isn't dispositive of anything. So, everyone chime the f*ck down please. Second, these folks get paid $200k? And people say there's no wage inflation? Third, the idea that an ibanker trainee is going to be appreciative for the two years of training a bank has given them and, in turn, give later private equity business to said bank is ludicrous. As a practical matter, his/her connection to that bank lasts a mere few weeks prior to them securing the next bigger, better and more Tinderable gig with which they prefer to identify. This seems like an outdated model with bad assumptions baked into it. The only sure thing seems to be that no matter which one of the PE firms these trainees land at, they'll be hiring Kirkland & Ellis LLP as bankruptcy counsel for one of their busted portfolio companies. Fourth, we love this bit about recruiting being earlier than ever "after an agreement to hold back fell apart." Hahahaha. So, private equity firms - KNOWN FOR DEAL-MAKING - couldn't even come to a deal amongst themselves?? This is like mutually assured destruction among KKRWarburg PincusCarlyle Group LPApollo Global Management LLCBain CapitalBlackstone Group LPTPG and Golden Gate Capital. Here's a great idea: lets trip over ourselves - and each other - to hire people with literally "no work experience." Those interviews must be PAINFUL AF. And, oh, hey you Managing Director. We love that you're "often forced to cancel business meetings last-minute to interview candidates." We're sure a multi-billion dollar transaction can wait for some piss-ant Harvard bro who inexplicably and unnecessarily writes equations on glass to regale everyone with his rad math skills. So lit. On what basis are these kids REALLY getting hired then? We think its probably pretty obvious. And its questionable how this BS still flies. What does any of this have to do with disruption? Well, when you're competing with venture capital and tech to acquire "talent," desperate times seemingly call for desperate measures. Logic has been disrupted. And it's absurd.

Notable (Loan Defaults, Oncor, Staples, Takata Corp)

Loan Deficiencies. Some interesting numbers here.

Oncor. Warren Buffett to the rescue? Perhaps, perhaps not. It seems there may be competition for the asset. It looks like Kirkland & Ellis LLP and Gibson Dunn & Crutcher LLP stand to make good fees on the transaction if it goes through.

Staples. Details on Sycamore Partners' proposed LBO financing here.

Takata CorpMore professionals with a seat at the table.

Professional Fees (Long Kirkland & Ellis)

Kirkland & Ellis LLP is printing money generally but Caesars has been particularly lucrative. No news there to anyone paying attention. All of the numbers are staggering, frankly, but on a relative basis, the most astounding number appears to be the amount billed by the Examiner's law firm, Winston & Strawn LLP. Admittedly, we didn't exist when this case was hot and heavy and so we didn't follow it too closely but $32mm - more than counsel to the UCC - seems rich to us. Footnote: did American Lawyer really need to single out one associate? Why is his law school even remotely relevant? So many questions.

IHeartMedia Music Festival > #FyreFestival

We suppose it could be worse: this could be the Fyre Festival. Its looking increasingly likely that the lineup for the next IHeartMedia Music Festival will include U2, Sia, Kendrick Lamar and Kirkland & Ellis LLP*. Something for everyone. We mean, seriously, we'd rather listen to a K&E tax attorney than Ja Rule anyway. Yippee!

*for the uninitiated, K&E is a bankruptcy law specialist.

News for the Week of 2/19/17

  • Capital Markets. The return of the Holdco PIK Toggle bond - a precursor to the inevitable market collapse. Or so they say.
  • Coal. Plants are closing. Looks like some votes from coal country were misplaced.
  • Dead MallsInvesting. See, e.g., this piece on Macerich. We don't typically cite to Seeking Alpha's collection of vagabonds and yahoos, but we found this particular analysis of A Malls interesting.
  • Exploration & Production17 months after filing its prepackaged bankruptcy case(s)...or was it prearranged?...sh*t, it's been so long that we can't even remember, Samson Resources Corporation finally has a confirmed plan of reorganization. We'd be curious to see what the professional fees are as a percentage of debt ($5.6b): perhaps this should be a new in-court ratio for courts to consider as part of 327(a) review. At least we got a new term of art out of it: "the Kirkland Prepack". So, there's that (2x if you consider EFH this week, too). 
  • Nuclear powerToshiba took a beating on Westinghouse this week. And now there are whispers of bankruptcy.
  • Retail. We have a Billions-style therapist in-house who keeps using bad sex metaphors to inspire us to be more positive about retail. Ok, no we don't: last we checked none of you are paying for this newsletter and so how the hell would we afford THAT?! Still, there are some positive signs for retail: Barron's, for instance, thinks Macy's stock has fallen too far and has upside. Meanwhile, specialty women's retailer J.Jill has filed its S-1 under the JOBS Act for an IPO which either means there's one retailer bucking recent trends or - more likely - TowerBrook Capital Partners LP is looking to dump this thing before Amazon gobbles it up like it has everything else. Damn...that was cynical and negative wasn't it?  Well, we tried. 
  • Retail II. This week we learned that Warren Buffett dumped his entire position of Walmart stock ($900mm) which, as this piece notes, ain't exactly a vote of confidence in retail. Perhaps Buffett would have reconsidered had he known about "Moosejaw Madness." You read that right: this week Walmart spent $51mm to purchase Moosejaw, a Michigan-based online retailer (with about a dozen B-and-M locations). Interestingly, the business is similar to Gander Mountain which, as we covered last week, is staring down the barrel of a liquidation. Oh, and hhgregg isn't exactly instilling confidence either (yes, its publicly traded). But, in an ironic twist, Amazon is upping to 8 B-and-M book stores.
  • Retail III. This won't help mall foot traffic: frustrated by a lack of options, start-ups like Dia&Co. are looking to tackle the plus-size market (with wholly-unoriginal Birchbox-style monthly mailings). And a fresh round of funding from well-known VC Sequoia Capital will aid the effort. Speaking of Birchbox, note that the business - despite being copied by a slew of other start-ups - isn't exactly a shining tower of success; it recently took on venture debt (and rif'd staff) and now it's exploring pricier options to juice revenues.
  • Shipping. A bloodbath in China for the shipbuilders and Hanjin Shipping = toast.
  • Uber. With $500 million of delinquent taxi medallion loans, NY state regulators seized the Melrose Credit Union. #disruption 
  • WindNo holding it back